The Knowledge of Luxuryhttp://luxuryinstitute.com/blog
DATA, NEWS, and INSIGHTS about high net-worth consumers and the luxury brand industry from the Luxury InstituteThu, 08 Dec 2016 16:42:21 +0000en-UShourly1http://wordpress.org/?v=3.9.14SURVEY: AFFLUENT CUSTOMERS RATE JEWELERS AS PROVIDER OF TOP CUSTOMER SERVICEhttp://luxuryinstitute.com/blog/?p=3530&utm_source=rss&utm_medium=rss&utm_campaign=survey-affluent-customers-rate-jewelers-as-provider-of-top-customer-service
http://luxuryinstitute.com/blog/?p=3530#commentsThu, 08 Dec 2016 16:42:21 +0000http://luxuryinstitute.com/blog/?p=3530The Israeli Diamond Industry
December 8, 2016
A new survey by the Luxury Institute, conducted among the top 10% earners in the US, the UK, France, Germany, Italy, Japan and China, has found that quality and customer service are the two most important attributes that affluent consumers use to define a product’s luxury status. According to Gem Konnect, jewelry and hospitality brands have the best customer service staff, while real estate and designer shoes were rated the worst in that regard.

In addition, customers in the UK and US are more likely to rate customer service as a necessity for luxury than customers in Japan and China. Superior design ranks third in the list of luxury attributes, and it is more important to UK and US customers than in other countries.

59% of US respondents and 33% of respondents across the other six countries ranked superior craftsmanship in fourth place.

Luxury Institute CEO Milton Pedraza said: “Half of the affluent consumers we just surveyed say that luxury sales associates deliver a personalised and relationship-oriented experience, which is encouraging, but it also suggests plenty of room for improvement when it comes to delivering a superior customer experience”.

Sarah Jessica Parker will open her first brick-and-mortar store in National Harbor next week. (Frazer Harrison/Getty Images)

After years of selling shoes and accessories at department stores, Sarah Jessica Parker announced this week that she is opening her first stand-alone boutique, a shoe-centric shop with $240 heels and $695 handbags.

But the location — inside a casino in Prince George’s County, on the outskirts of Washington — has left some, like market researcher Pam Danziger, stumped.

“It doesn’t make sense to me,” said Danziger, whose work focuses on affluent consumers.

Why not New York? she wondered. The city has become synonymous with Parker since her run as the star of “Sex and the City.” Even a dozen years after its airing, the show remains so popular that people still line up to take tours of the characters’ hot spots around town. Parker herself lives in the West Village.

“It is a bit surprising,” said Michael Isen, senior vice president at NAI Michael, a commercial real estate brokerage in Lanham. “That someone like Sarah Jessica Parker wants to open their first store in Prince George’s County speaks volumes.”

Sarah Jessica Parker and business partner George Malkemus III walk through the site of the upcoming SJP Collection store at MGM National Harbor. (SJP Collection)

The SJP by Sarah Jessica Parker store, which debuts next week at the MGM National Harbor, will open alongside a Louis Vuitton store and restaurants by prominent chefs including José Andrés and Marcus Samuelsson.The property will also have a 125,000-square-foot casino, a spa and salon, and 308 hotel rooms.

“I’m sure it boils down to: MGM just made an incredibly good deal,” Danziger said. “She’s getting prime real estate with the potential for a lot of traffic, likely for very little money.”

To understand why Parker might have ended up in Prince George’s County, Milton Pedraza of the Luxury Institute says it makes sense to look at the state of the retail industry. Luxury retailers, from Burberry to Prada, are struggling to get people into their stores. Spending is down, and traffic to high-end shops has slipped 20 percent.

“In short, there is a crisis sweeping the premium and luxury retail market today,” Pedraza said. “So why not go out on a limb and do something paradoxical? Consumers are tired of the same old, same old.”

There are, he said, a number of factors in Parker’s favor: The Washington suburbs are home to six of the country’s 10 wealthiest counties (although Prince George’s County isn’t one of them). And the casino, which opens Thursday, is likely to draw large crowds of locals, as well as tourists, looking for glitz and glamour.

“She will have a high-end, captive audience that is looking to splurge,” Isen said.

To be sure, Parker isn’t the first to open an inaugural store in the outskirts of Washington. A number of big-name companies, including Apple and Spanx, opened their first local retail stores outside of the District. (Both chose locations at the Tysons Corner Center shopping mall.)

It isn’t uncommon for retailers to test the waters in a lesser-known suburban market before opening up in a more-visible location such as New York or Los Angeles, says Marshal Cohen, a retail analyst for market research firm NPD Group.

“If it doesn’t work, very few people will notice,” he said. “You can just close up and move on and nobody is the wiser.”

Travel experiences are proving to be dramatically more important to affluent millennials, with most interested in hotel accommodations and flight tickets rather than luxury goods.

A recent report from Agility showed that across the globe the majority of prosperous millennials are likely to travel abroad in the next year. Percentages in China, India, Singapore, Malaysia, Hong Kong, South Korea and Taiwan are all above 71 percent for those interested in abroad travel over the next 12 months.

“Millionaires in Asia are young and many of them in our study are in the millennials age group,” said Amrita Banta, managing director at Agility Research & Strategy. “Travel is the new luxury in Asia amongst this profile of consumers and we see that the appetite for travel has increased this year from the last year but the appetite to buy luxury goods has definitely decreased in our sample.”

Affluent consumers
Agility’s Asian Millennial and Millionaire Research Results shows there will likely be a decline in luxury retail in Singapore in the upcoming new year, as there has been a 15 percent drop in millennial interest in spending more with luxury goods.

Singapore shoppers

Luxury hospitality brands might have an opportunity to expand into luxury lodges and winter apparel and accessories in Asia. Findings are showing an increase interest in skiing.

Other hobbies such as wine tasting and fine dining are making an impression on affluent Chinese consumers. More than 51 percent were interested in wine tasting and 48 percent in fine dining.

Chinese shoppers

However, while passion for spending more on luxury goods is dropping, interest in shopping in general is still strong. More than 69 percent of Chinese consumers are interested in shopping as a hobby.

Behaviors in luxury
Another study noted that millionaires from the X generation held onto traditional luxury events while millionaire millennials are straying away from happenings such as fashion shows and auto races, according to a new report from Shullman Research Center.

While there are vast differences in culture, behavior and values between lower income consumers versus millionaires, this also holds true for differing generations. For instance, family is the top priority in millionaire Gen-Xers’ lives with 89 percent believing so, but only 67 percent of millionaire millennials say the same (see more).

Also, quality tops attributes such as craftsmanship and service as the number one defining attribute affluent consumers use to discern a good’s luxury status, according to other research by the Luxury Institute.

Behind quality comes customer service, which more than half of consumers mentioned as a characteristic they associate with luxury. Despite global trends, residents of individual nations have varied priorities when it comes to luxury goods, with differing sentiments towards the value of products (see more).

“Asian millionaires are now discovering new interests like fine dining and wine tasting – this year we see activities like Skiing in the slopes of Japan becoming popular with the Singaporean millionaires for instance,” Ms. Banta said.

Millionaires from the X generation hold onto traditional luxury events while millionaire millennials are straying away from happenings such as fashion shows and auto races, according to a new report from Shullman Research Center.

While there are vast differences in culture, behavior and values between lower income consumers versus millionaires, this also holds true for differing generations. For instance, family is the top priority in millionaire Gen-Xers’ lives with 89 percent believing so, but only 67 percent of millionaire millennials say the same.

“When luxury marketers and their agencies think about how to reach and potentially communicate their messages to millionaires in ways beyond the traditional and digital media channels, they need to realize that millionaires are a materially different breed of consumer— different not only from those with fewer financial resources, but also from one another generationally,” said Bob Shullman, CEO of Shullman Research Center. “Marketers of luxury products and services who are not knowledgeable about these differences do so at their own and their company’s peril.

“Notably, from our perspective, it is surprising how different millionaire Gen-Xers are in their sporting, lifestyle and cultural interests compared with millennial and boomer millionaires,” he said.

The research was conducted online that surveyed 1,690 respondents with household incomes of at least $75,000.

Differing values
The differences between millionaire millennials and Gen-Xers are also displayed in their varying interests in sports. Millennials are more interested in adventure-like sports such as snorkeling, jogging and rollerblading while Gen-Xers are interested in traditional affluent sports such as tennis and golf.

Affluent Gen-Xers value tennis

Only 19 percent of millionaire millennials plan to play tennis in the next year, whereas 45 percent of Gen-Xers are likely to play. However, 24 percent of affluent millennials claim to be planning to snorkel in the next year while only 2 percent of Gen-Xers are likely to.

Millennials who are millionaires are also more interested in painting and the arts compared to their predecessors. About 26 percent of millennials are interested in painting and drawing compared to 13 percent of Gen-Xers.

However, baby boomers are almost as interested in painting as millennials, with 24 percent.

Giorgione painting

Interest in museums is completely disconnected throughout generations. Forty-two percent of baby boomers are interested in museums, but only 9 percent of generation X and 10 percent of millennials are interested.

More insight
Quality over price is exceedingly important when it comes to millionaires and affluent Americans. For instance, 83 percent of all generations value quality over price when deciding on purchases.

This is also true for 96 percent of millennials, 81 percent of Gen-Xers and 75 percent of baby boomers.

Other research by the Luxury Institute showed that quality tops attributes such as craftsmanship and service as the number one defining attribute affluent consumers use to discern a good’s luxury status.

Behind quality comes customer service, which more than half of consumers mentioned as a characteristic they associate with luxury. Despite global trends, residents of individual nations have varied priorities when it comes to luxury goods, with differing sentiments towards the value of products (see more).

The drastic shift in consumer behavior from the rapid evolution of technology has resulted in a 20 percent drop in customer spend with luxury brands, according to another Luxury Institute.

Luxury Institute’s “2016 State of the Luxury Industry” report shows that consumers are spending much less in the luxury market compared to two years ago, but luxury marketers will have an uphill battle to determine how to combat this. While digital and mobile avenues are vital to success for any retailer or brand, it seems that affluent consumers are interested more in shopping with luxury brands at bricks-and-mortar locations (see more).

“We were very surprised by how much more millionaire Gen-Xers are into attending fashion and trunk shows and auto races compared with millennial millionaires (for example, 35 percent of Gen-Xer millionaires are into attending auto races compared with 1 percent of millennials while 36 percent of the Gen-Xers attend fashion and trunk shows while only 7 percent ofmMillennials attend these shows),” Mr. Shullman said.

Given its diverse and discerning customer base, London department store Harrods hires sales associates from around the world who align with the brand’s core values

“Pay no attention to that man behind the curtain,” says the Wizard in an iconic scene from the classic movie, “Wizard of Oz.” As Dorothy, Scarecrow, Tin Man and Cowardly Lion stand in awe of the wizard’s image projected on the big screen, complete with pyrotechnic special effects of flashing lights, booming thunder, fire and smoke, Toto pulls back the curtain to reveal the real man pulling the levers.

That reminds me of the current state of luxury marketing today.

New sense
Luxury brands are focused on high-tech smoke-and-mirrors to create even more dazzling and awe-inspiring impressions of their brands that flash up on the screen of consumers’ computers, tablets and mobile phones.

But while so many luxury brands are investing huge amounts of time and money to make those special effects, a few brands such as Intermix, Porsche, Bottega Veneta and Gucci are putting their efforts to where the real power of luxury branding resides: on the people side of the marketing equation.

Milton Pedraza, CEO of the Luxury Institute, and I recently sat down to discuss how our independent research has led us both to a similar conclusion: that person-to-person retail is the most powerful way to bring the luxury value of a brand to the attention of discerning, affluent customers with money to spend.

Milton Pedraza is CEO of the Luxury Institute

So we decided to share as we pull back the curtain of the most underused, yet most powerful marketing strategy available for luxury brands today: the personal relationships made by the customer-facing retail sales staff.

Mr. Pedraza asserts that in their marketing and advertising mix, luxury brands have been focused primarily on the spectacular, new and shiny opportunities offered by technology.

“Retail technology, social media and ecommerce are the hot topics,” he says. “And those are very important.”

But their infatuation with technology is distracting them from focusing on the human element.

Ironically, Mr. Pedraza points to how digitally native, non-luxury brands such as Bonobos and Warby Parker, which have mastered all the high-tech marketing techniques, are now opening stores and bringing their virtual experience into the real world.

“They’re beginning to understand that high-performance customer relationship building is, and will be, the true differentiator, especially as robots and artificial intelligence take over the mundane tasks that retail front-line people are forced to do today,” he says.

Effective retail management is essential to Harrods’ customer focus

Floor customers
Like the Internet disruptors now establishing footholds in traditional retail, established retail brands are waking to the importance of developing their personal relationships with customers.

That too many retailers are underperforming on the shop floor is without question.

“The top 20 percent of sales associates account for 80 percent of the sales,” Mr. Pedraza said. “They are critical to the business. And yet, there is another 80 percent of sales associates who are under-trained, under-utilized and under-performing.

“The high turnover in associates leads to customer turnover and massive amounts of lost potential and revenues,” he said.

The value for brands to realize and develop the potential of their human capital is clear.

Indeed, he understands the difficulties for brands to select, train and retain the best sales staff, but knows the competitive advantage when they rise to the challenge.

“’Difficult’ is where you find true and sustainable competitive advantage because no one will follow you there,” Mr. Pedraza says.

The need to develop the person-to-person potential at retail is clear and both the brands as employer and the career sales professionals will benefit.

“Great retail brands in apparel, accessories, automotive and dozens of other retail categories are desperate to find qualified people where you can earn $60,000 to $120,000 in three to seven years as an associate, or manager,” Mr. Pedraza says.

“In specialty retail and luxury, the job of a high performance relationship builder will become far more important, and the individual will be far more skilled,” he says.

“Human relationship-based client conversion and retention will be recognized as the critical drivers of revenues and profits in retail.”

The Saks Downtown store in New York’s Brookfield Place across from the World Trade Center

AS THE ADAGE goes, ‘What is old is new again,’ the heritage luxury brands and the great retailers reached their pinnacle by building extraordinary personal relationships with their customers, day-in, day-out, face-to-face and hand-to-hand. That never should have gone out of style, but unfortunately, too many brands and too many retailers have been seduced by the attractions that technology promises.

Mr. Pedraza and I call on those brands and retailers to get back to what made them great in the first place: the personal relationships built on the sales floor.

Pam Danziger

Pam Danziger is Stevens, PA-based president of Unity Marketing and a luxury marketing expert. Reach her at pam@unitymarketingonline.com.

Quality tops attributes such as craftsmanship and service as the number one defining attribute affluent consumers use to discern a good’s luxury status, according to new research by the Luxury Institute.

Behind quality comes customer service, which more than half of consumers mentioned as a characteristic they associate with luxury. Despite global trends, residents of individual nations have varied priorities when it comes to luxury goods, with differing sentiments towards the value of products.

Luxury Institute’s survey was conducted in the United States, the United Kingdom, France, Germany, Italy, Japan and China, with respondents from about the top 10 percent of earners in their respective countries.

Divided priorities

Customers in the U.K. and the U.S. are more apt than respondents from Japan and China to mention superior customer service as a necessity for luxury. A superior design ranks third, but those in the U.K. and U.S. mention it more frequently than those from other countries.

While superior craftsmanship comes in fourth among global consumers, this attribute is mentioned by 59 percent of U.S. residents, compared to 33 percent across the other six nations.

Personalized offers, loyalty programs and value add-ons were mentioned by less than a quarter of consumers, but those who do define luxury by these points are inclined to say they are improving.

There is a disparity about the general quality of luxury goods. Those in China and Italy are more likely to report improvement in quality, while those in the U.S. are more apt to believe that luxury goods’ quality is declining.

When considering the ideal front line staff in a luxury boutique, courtesy and politeness are most important to affluent shoppers. Product expertise is a close second, with more than half saying they look for this knowledge in the associates they deal with.

Boss on Demand

The survey participants mentioned jewelry and hospitality brands as having the best customer service staff, while real estate and designer shoes got the least nods for their quality of service.

“From our numerous one-on-one discussions with luxury CEOs, we’ve often heard that a majority of success stems from superior products, but the rest depends on relationship-building expertise and execution of front-line teams,” says Milton Pedraza, CEO of the Luxury Institute. “Half of affluent consumers we just surveyed say that luxury sales associates deliver a personalized and relationship-oriented experience, which is encouraging, but it also suggests plenty of room for improvement when it comes to delivering a superior customer experience.

Even with the rise of digital channels, frontline sales staff are far from obsolete, according to results of a survey conducted by InMoment.

The bricks-and-mortar shopping experience no longer exists in a vacuum, with consumers arriving at a store armed with information from research conducted before or even during their trip. However, while shoppers spend about twice as much in-store when they navigate to a brand’s Web site while shopping, their expenditures grow to four times more if they interact with both an associate and the brand’s Web site while in-store (see story).

Of all the unlikely collaborations out there, the latest one that boggles my mind is the recently launched Prabal Gurung x Pokémon Capsule Collection at Jeffrey’s NYC Boutique.

Inspired by the vibrant colors, textures, silhouettes and spirit of five iconic Pokémon: Pikachu, Jigglypuff, Squirtle, Bulbasaur and Charmander, this exclusive nine-piece collection combines “the playfulness of the Pokémon brand [with] the style and sophistication of Prabal Gurung,” noted in the press release. For instance, there’s a blue knit and pencil skirt inspired by Squirtle (the water-type Pokemon), with the chiffon insert made to feel like a wave, and piping details made to look like Squirtle’s curved shape.

As someone raised in Nepal and grew up traveling across Asia, Gurung considers Pokémon a key part of his childhood, and the perpetually happy Jigglypuff his spirit animal. So when he was invited to design this capsule collection at Jeffrey’s, the designer thought that it was exciting to engage with the characters in this new way.

“The essence of the characters, not just their aesthetic, are captured and highlighted in the elevated details such as character-inspired zipper pulls and the Prabal Gurung signature draped back detail,” he said.

Much as this collaboration sounds interesting, but at $325 for a White Viscose Jigglypuff Printed T-Shirt to $1,795 for a Navy/Red Silk 4-Ply Crepe Short Sleeve Colorblocked Tunic Dress with Embroidered Cording, will die-hard Pokemon fans really think, “Gotta shop ’em all?” And like Karen Eggleston, Senior Manager of Licensing at The Pokémon Company International said, “The pieces are not necessarily “timeless” so it will require a woman who has a fashion passion and the wallet to afford to buy a product that may or may not fit into her wardrobe next year.”

The celebrated designer certainly thinks so. He believes his clientele has an appreciation for humor and sharp wit, qualities that are cleverly represented in this collection.

Milton Pedraza, CEO of Luxury Institute agrees. “Although this collection isn’t particularly affordable for all, it can certainly appeal to affluent women on the younger side (25 to 45 years old) who like playful clothes could find the products appealing,” he said.

While it seems like forever since the Pokémon Go craze, the luxury expert still considers this collaboration to be quite timely. In his perspective, Gurung has successfully reinvigorated the Pokémon excitement and makes it wearable “in this highly cohesive and coherent collection of playful, unique and high quality, everyday outfits,” noted Pedraza.

Clearly, this collaboration could help the designer reach out to a younger audience while The Pokémon Company build its fashion program. But insofar as the larger implications, the luxury expert believes we are in the middle of a fashion and retail revolution.

“Creativity and innovation is a must for designers and brands. Take the unique match up of BMW and Louis Vuitton in “The Art of Travel,” or Apple and Hermes in the iWatch, I foresee this Prabal Gurung x Pokémon Capsule Collection to have a reasonable chance of success,” said Pedraza.

Who knows, maybe this could inspire future crossovers between Star Wars and some young top fashion brand, or Minecraft x Abercrombie and Fitch?

Milton Pedraza, CEO of the Luxury Institute, announced the launch of a new start-up program, the Retail Performance Academy (RPA). The academy’s Elite Retail Program (ERP) will bring evidence-based, Ivy-League quality training, coaching and networking to carefully selected students who commit to mastering the high performance, relationship-building skills of retail’s top-earning experts.

Top-performers in retail can earn anywhere from $60,000 to $100,000 within three to five years, and top associates who build a client base can earn $200,000+ per year in five to seven years. A top-tier luxury retail flagship store manager in New York today can earn a package of $250,000, and an average store manager can earn $80,000.

Pedraza has helped dozens of brands such as Gucci, Bottega Veneta, Intermix and Porsche to improve performance metrics in a humanistic, measurable way. Retail Performance Academy’s core principles are based on learning how to demonstrate product expertise and building lifelong client relationships using the mastery of emotional intelligence-based behaviors and metrics.

The Retail Performance Academy was inspired by three converging trends: first, the U.S. retail industry is a $5-trillion juggernaut that continues to grow, and the top 20 percent of sales associates accounts for 80 percent of sales at top-tier brands. Second, the luxury and specialty retail brands, including apparel, jewelry, watches, automotive, technology, and dozens of other categories, are desperate for, and have open positions for, high-potential, well-trained sales associates they can reward and retain. Third, while a college education is extremely valuable, it is most valuable for the children of the wealthy who go to elite colleges.

Only 52 percent of middle-class and low-income students who enroll in college graduate within six years. Most of the rest drop out usually after their freshman year. And of those who graduate college, nearly 44 percent are underemployed (hold a job that doesn’t require a college degree) or unemployed. Many of these young people, even if they graduate, lack the skills that employers need, and yet incur massive debt that cripples their future.

Luxury automotive brands including Mercedes, Porsche, and Pininfarina (the Italian design house whose core client is Ferrari) have all announced or opened branded residential towers. Now bespoke British manufacturer Aston Martin has followed suit, announcing its participation, in partnership with G and G Business Developments and Revuelta Architecture, in a high-end high-rise tower—the Aston Martin Residences—on the last remaining waterfront site along Miami’s Biscayne Bay.

Aston Martin chief creative officer and design head Marek Reichman will be responsible for the public spaces, including two lobbies, a fitness center, and a spa, using finishes and sensibilities in line with the 104-year-old automaker’s exquisite, clubby vehicles. “And if some of the customers say, we would love for you to design our interior,” Reichman says, “we will be happy to do that, too.”

As an independent company that produces exclusive low-volume, high-reputation, high-cost cars for an international clientele, Aston Martin brings to the project a wealth of knowledge of what elite customers desire. Apparently, part of this is the striking and unconventional, like interior switch trim matched to an owner’s favorite platinum jewelry or a hood ornament made of lacquered beetle wings—both projects Aston has completed in its cars. “The materials we use are very exotic—we are living in an exotic world, even compared to a lot of luxury apartments,” Reichman says. “And you sometimes wouldn’t necessarily think about those materials in your home, but actually, they’re very applicable.”

Despite the building’s name, Reichman notes that the branding exercise is “everything but literal.” There will not be any automotive amenities such as drive-in elevators or car concierges. Neither will the apartments reflect the proportions or shape of car designs. Rather, the connection will be experiential. “What you will get is exactly what you will get sitting in an Aston Martin DB11 on a long journey, and that is a sense of involvement and comfort,” Reichman says. “The most amazing thing about the DB11 for me is that it’s an incredibly powerful sports car, but you can sit in that car for a long time and still remain motivated and enjoy your environment. Which is just how you want to feel at home.”

Why would a luxury automaker enter into a residential partnership like this? The answer is, in part, to foster a deeper connection to the brand, one that transcends the vehicular. To retain consumers long-term, brands such as Aston Martin feel they need to create a holistic lifestyle multiverse, one that brand ownership allows customers to access and inhabit fully, wherever they are.

This quest for ubiquity seems a bit at odds with the kind of exclusivity that luxury manufacturers attempt to instill, but brand extensions have become a big business for automakers. Jaguar, Bentley, Mercedes, and others offer branded leather goods, branded custom tour packages, branded yachts and cruises, and branded helicopters, allowing their customers to remain connected to their logo even while they’re away from their car. The goal is to make consumers feel like they’re part of a special club whose membership and amenities follow them everywhere.

In talking about the apartment project, Reichman reflects on this insider nature. “I think this building is for people who appreciate luxury, who love the feeling of something which is timeless, and especially those who love the fact that if you’re part of the world of Aston Martin, you get a great thumbs-up from the product you drive, and you walk away with a kind of pride in ownership and a sense that the car is beautiful, a kind of wow,” he says. “I think the customer is going to be wanting that same feeling when they come to look at an apartment.”

Whether the proximity of the residential projects will enhance or undermine the sense of exclusivity these automakers and developers desire remains to be seen. The Porsche, Pininfarina, and Aston Martin towers are all in Miami, a confluence that seems to approach oversaturation.

“While it is not a perfectly logical complement, luxury automotive branding on real-estate assets can create greater awareness for both brands and elevate the offerings of each,” says Milton Pedraza, CEO of lifestyle research and consulting firm the Luxury Institute. “As the luxury industry remains challenged, we will see more brand partnerships and experimentation,” he says. “Many of the experiments may not succeed, but that is the nature of innovation.” The sales office for the Aston Martin Residences is slated to open next spring, with groundbreaking expected in the summer.

Milton Pedraza, CEO of the Luxury Institute and a luxury marketing expert who has helped brands such as Gucci, Bottega Veneta, Intermix and Porsche, has set his sights on one of the most challenging aspects of retail: qualified talent.

As founder of the newly launched Retail Performance Academy, Mr. Pedraza aims to introduce high-caliber training, coaching and networking to select students who will then graduate onto retail jobs in luxury and other sectors within the $5 trillion retail business in the United States. The non-accredited Elite Retail Program will run 10 weeks, three nights a week, followed by nine months of coaching and mentoring.

“There is a crisis today in retail,” New York-based Mr. Pedraza said. “Simply put, there are many high-paying, front-line jobs in retail and a lack of qualified candidates.

“Many retail executives that I meet lament privately that the retail industry fails to select and educate most of the people they recruit,” he said.

“Meanwhile, the industry bleeds associates, and clients, who are dissatisfied with the experience, even at top-tier luxury brands.”

In this Q&A, Mr. Pedraza discusses the state of retail and why it cannot hold on to its talent, especially sales-level staff, how the Retail Performance Academy meets a need, the process of recruiting and placing students and the role of bricks-and-mortar stores in an era where shopping and buying are increasing migrating to online and mobile. Please read on.

In an age of growing digital sales, including ecommerce and mobile, why come up with the idea of the Retail Performance Academy?
It’s a question of quality over quantity.

Digital will continue to grow, and there may be less stores, and less sales associates, relatively speaking.

However, according to the 2016 World Economic Forum report on “The Future of Jobs,” specialized sales representatives will always be in high demand, second only to data analysts.

Think of what Apple would be without its front-line associates.

Retail Performance Academy is an innovative training alternative to college, and/or supplementary to college. It is modeled after a post-graduate invitation-only program I have been attending at Stanford Business School on Scaling Up Excellence.

There are three secrets to the success of Stanford and other great educational institutions such as Harvard.

First, selecting the best people.

Second, having the best teachers, educational content and standards.

Third, maintaining a network that helps the alumni thrive, especially after they graduate.

Similarly, Retail Performance Academy will select applicants with great people skills through a rigorous interview process similar to the Ritz-Carlton and Apple.

We expect to accept only 10-20 percent of applicants.

Once accepted, students will master client relationship building expertise through deliberate practice and coaching methods pioneered and proven with top-tier brands.

Then, we will use best efforts to fast-track these students into our network of top-tier retail brands.

After students are certified and go to work at a top-tier brand, they will continue to receive coaching and mentoring from advisors for nine additional months to help them be effective on the job.

There will be an extensive alumni and retail executive network that will scale and thrive over time.

The famed Rodeo Drive in Los Angeles’ Beverly Hills area

Retail’s in quite a dodgy shape right now, over-stored, weakening customer and employee loyalty and the threat of Amazon. Is customer-ready talent key to bringing back some of the shine?
Yes, retail is undergoing a fantastic revolution.

A tremendous amount of creative destruction and innovation is required.

Brands are going to have to differentiate dramatically, or die.

Technology will be part of the solution, but great technology is usually a commodity, and rarely a differentiator.

The algorithmic approach to personalization will only go so far with human beings.

One small, but telling, piece of evidence for the need for human expertise and emotional connection is the fact that the use of top-tier travel agents by millennials is up 50 percent in the past year.

In many industries, the synthesis of technology with high performers is the winning formula.

I don’t know one retail executive who doesn’t state that the performance of front-line people is in the top three of the critical success factors.

The relationship skills provided by Retail Performance Academy will prove to be one of key innovations that will be required to overcome the challenges of retail.

Which class of retailers are you specifically targeting with the academy?
We are targeting online and omnichannel specialty, premium, and luxury retailers in dozens of categories.

These are the classic high-value categories such as apparel and accessory, jewelry, watches, technology, automotive, appliances and furniture.

Department stores are also going to a concession model, and many people believe that the boutique retailer is coming back with a vengeance.

All of those retailers are starving for associates who can build a portfolio of loyal clients.

Only a few retailers are skilled at selecting and training, and even they can’t keep up with the demand for top people.

New York’s Fifth Avenue near Rockefeller Center and Saks

How will you source students?
We believe there are several sources of students.

First are the high school graduates with good grades, who may not want to attend, or be able to afford, college.

Then there are people who don’t graduate, who account for 45 percent of all people who enter college.

Then there are the 44 percent of college graduates who are underemployed – think about baristas, valets, et cetera: honorable, yet, low-paying jobs.

There are also career changers such as the millions of mothers re-entering the work force, or people who retired early, and want to get back to work.

Many people currently working in retail may have the people skills, yet, are not getting the training, practice, coaching and important network access they need to reach their true earning potential.

Finally, there are thousands of small high-end retail business owners. Many of those people have great people skills and can develop a career as an elite retail performer.

As [Fortune magazine writer] Geoff Colvin states in his book, “Humans are Underrated,” “Being a great performer is becoming less about what we know, and more about what we are like. The most valuable people are increasingly relationship workers.”

Eyes on the prize

In terms of the faculty, are you turning to experienced retail executives or is it you and your team?
I will personally train the initial classes along with top-tier retail experts. Then I will focus on scaling the business with excellence.

We currently have a waiting list of top retail executives at all levels who would love to teach, mentor and coach our students using our proprietary methods.

We intend to scale slowly.

As my Stanford Professor, Dr. Huggy Rao, likes to say, “Sometimes you have to scale slowly to scale with excellence.”

Milton Pedraza is CEO of the Retail Performance Academy and the Luxury Institute

So what kind of training with these students receive that will make them store-ready upon graduation?
We teach students to be the entrepreneurs of their lives.

Initially, students will receive training on determining their life purpose and true values.

Then, they will have extensive field projects and presentations, and rigorous team exercises using deliberate practice, particularly on building extraordinary client experiences and mastering emotional intelligence skills. They will continuously practice communication skills. They will learn to self-assess, confront the reality of their behaviors, and how those behaviors measurably affect high performance.

Finally, they will have exposure to retail experts and top executives who will mentor and coach them on the opportunities of a high performance retail career.

What will the curriculum look like?
The curriculum is based on training and development science gathered from the military, top-tier hospital operating rooms, top-gun pilot training, cognitive psychology and our expertise in achieving documented results with luxury brands.

The methods are designed to minimize errors and optimize results.

The program content is confidential, but let me give you some concrete examples.

Most retail associates receive ineffective robotic training, and they will never be allowed to be creative and participate in designing a retail-training program.

Retail Performance Academy students, working in teams under the guidance of expert instructors, will create a comprehensive retail-training program. They will rigorously practice training other teams, and receive instant feedback. This achieves a high level of mastery.

As another example, the students will learn the skills of measuring and assessing their own behaviors daily. They will become self-coaching entrepreneurs within the brand.

We know of no entity, even the Ivy League, that includes such a hands-on, rigorous level of practice.

Milton Pedraza at Stanford University

How will you win accreditation from retailers for your organization?
We are not seeking accreditation, nor do we expect students to be funded by government loans.

The Retail Performance Academy program’s reputation will be based on how well we select, train and help place our students at top-tier brands.

As with Luxury Institute, our performance will be judged by documented results over time.

After speaking with more than 50 top retail executives, all have expressed interest in fast-tracking our students through the interview process.

Over time, as our graduates achieve great results, our reputation will grow and that will be more credible than any accreditation can ever offer.

It’s surprising that various trade associations haven’t allied with universities to produce retail sales talent for the retail business. Why do you think that’s the case?
The importance of properly selecting and training front-line professionals has not been fully leveraged.

A few certificate programs exist that have online modules and/or classroom lectures.

We believe that high-performance relationship building can only be learned through rigorous, live deliberate practice.

There is a crisis today in retail.

Simply put, there are many high-paying, front-line jobs in retail and a lack of qualified candidates.

Many retail executives that I meet lament privately that the retail industry fails to select and educate most of the people they recruit.

Meanwhile, the industry bleeds associates, and clients, who are dissatisfied with the experience, even at top-tier luxury brands.

Retail Performance Academy is an innovative solution to the crisis.

Good service sparkles

How much are you charging students for the course?
The fee is $9,500 for a one-year program that includes 10 weeks, three nights per week, plus nine additional months of coaching and mentoring.

We expect that most of those accepted will work while attending our program.

Over time, we will provide full, or partial scholarships, at our discretion, to applicants who demonstrate a need.

Placement services – are you offering that as well as any apprenticeship?
Using our vast retail network, we will provide a best efforts service of fast-tracking the resumes of our students into top-tier brands.

Having the 14-year proven track record and network of Luxury Institute is helpful in gaining initial credibility and achieving interviews for our students.

The Retail Performance Academy is a step in the education direction, away from your consultancy leitmotif. How are you going to juggle the two?
Retail Performance Academy is simply another way to serve brands, although with a wide scope, beyond luxury brands.

Luxury Institute will always remain a boutique research and high-performance consultancy specialized in luxury.

Retail Performance Academy is geared to be a larger, yet selective, training program that serves, first and foremost, student careers and lives. The students, in turn, will serve the top-tier brands and their clients.

Retail’s known for its high rate of talent churn. Will this training help stem that?
Yes, we believe the future of front-line retail will be revolutionized.

Front-line associates will be selected for great people skills, much the same as coders today are selected for their great technical skills.

There will be educational specialization in high-performance relationship building skills based on expertise in emotional intelligence.

While most people think emotional intelligence is innate, the research shows it can be taught to anyone.

Those born with an innate talent for emotional intelligence will do far better at client relationship building if they apply that talent.